cat-right

Analyzing the Future Bet

Analyzing the Future Bet

The future bet originated in 1864 on the Chicago Board of Trade. Originally they were used by farmers to hedge their agricultural production. Today  you can find futures on nearly everything, including who wins the BCS Title. 

I touched on this topic in my Georgia future bet post as well as in the comment section with some very knowledgeable readers contributing too, and thought that it deserved an actual post since I’ve been thinking a lot about it. When analyzing a future bet, as Trentmoney expressed, it needs to meet certain categories. I think a lot of people weight some things too much, and other things not enough when analyzing a future bet.

In the hedge fund and private equity realm of finance, we use a term called “seeking alpha.” Alpha is the return that you can get outside of non-market returns. This ultimately becomes the strength of a fund manager.

In betting, this alpha comes from the strength of the capper. Everyone sees things differently, so half the battle in my eyes of capping, is sifting through the dust, and finding out what matters and what does not. Find a few things that you see as game changers (QB vs. Secondary, Coach vs. Coach, Motivation, etc.) and let those help to compile your side and ultimately your play.

Alpha is especially important with sports futures. You have odds that you will sit with for the length of your investment (the season). You have to find the alpha, or value, in the odds to bite on them. I spoke about this in my Georgia post and in the comments. Where do you find your bang for your buck? How much risk do you want to give to achieve the reward?

Keys to the Future Bet

First, you obviously have to ask “do they have a valid chance of MAKING the BCS Championship?” Making is the key word here. We all know how royally jacked up the BCS is (at least until the playoffs start, and then we’ll find more problems). Once the team makes the Championship, hedging automatically locks you in with profit.

You need to be able to realistically see a team making its way into the BCS Title game. This involves analyzing the schedule, returning players, and something many overlook, other teams that start out the season ranked ahead of them in the polls. To make the title game, you roughly have to be Top 3 in the polls at the end of the season.

How do they make it?

First, is by being the best team in the SEC, which is most likely the SEC Champion. The SEC is regarded as the best conference in college football and quite frankly across the board, it is. That is slightly bias, but top to bottom it is the best; no questions asked. There are some other VERY good conferences out there that typically have 2-3 good teams, but their doormats typically can’t compete with the SEC doormats.  

Future BetWith that being said, the winner of the SEC generically is regarded as one of the best teams in college football, and makes it to the championship. If you have an undefeated SEC team and no other undefeated team in the country, it could be two SEC teams (like last year) playing for the crystal. So picking the winner of the SEC generally gives you some solid odds in a future bet.

After the SEC, you have to look at the other conferences. My opinion here is that the other team, to beat out the SEC, has to be undefeated. This may be the first year that two non-SEC teams could make the National Championship in a very long time. I think USC and Oklahoma both could run the table. I think there is enough parity in the SEC this year that every team could walk away with one loss, and with two other teams from solid conferences being undefeated would block the SEC from this game.

To analyze this key to the future bet, the first thing to look at is the team.

Analyzing a team Pre-Season

Future Bet

Coaching. Don’t overlook this. How successful has a coach been with attracting new talent, developing that talent, and implementing that talent? Can they take a 3-star recruit and make him a contributor? Can they fill the gaps in the team that graduated the year before? Will the coach be wasted on a motorcycle with his mistress and get fired mid-season? All of these things have multitudes of possibilities.

Returning Players. Who took the summer off? Who has a talented QB leader and a good returning defense? What QB and WR spent the summers training and running routes together? How well will a player recover from ACL surgery? What player will pull a Garcia? Yes, I created this term in memory of Stephen Garcia, the SC QB that just loved boozing and fighting frat bro’s too much. Can you blame him? Some of these things you can figure out, some you just have to make educated guesses on.

Schedule. How do they get to the title game? Can they go undefeated? Where are the upset spots? Can you see them prevailing?

The Odds. To make a play on a future bet, you have to have enough odds to place the bet, as well as hedge it appropriately if necessary. In some instances, you can even hedge a team in a conference championship if you already have a good guess they won’t win or you know the other teams that will be playing in the game already.

It all comes down to alpha. Do you have enough of a payoff to lay the money with so much unknown?

Ending Thoughts

Honestly, I’m not a huge fan of the future bet, and as the season goes on, you will hear me preach about managing your bankroll early in the regular season, and early in the bowl games. I usually wait till week 3 to start upping my unit plays. That is because I like to analyze the things I just mentioned above, which cannot be done until you see a team play. I’ve heard so so so many times of cappers that have hit over 50%, and generally do a good job of picking sides, that end up with losing seasons somehow. The answer is because of how they manage their bankroll.

Think about it this way, if you LOVE facebook stock (haha!), and only like Apple (This is a ridiculous example obviously, and I am not trying to give you financial advise nor guiding your investments) would you put an equal amount in FB and AAPL? Absolutely not.

In football terms, if you really believe ‘Bama is going to cover against Michigan and 4 out of the 5 key game changers (as discussed above) are in your favor, but on the contrary, only 2 game changers in the USC vs. Hawaii game are, what game are you putting more money on? It sounds so obvious, but so many people overlook this aspect.

Everyone has their own methods. The S&P is up 12.7% YTD. That is a great return in a portfolio that any investor would love to have. If you want good returns, you will traditionally follow my methods more of allocating differently to different plays. Win more money on your big games, lose less on your small games.

If you want to have the huge swings that put most gamblers in rehab, bet a shit ton of money on every game and hope you hit more than you don’t. There’s no perfect science, but there is a science to generating positive returns.

Let me know your thoughts. For quick response, tweet me @mtsabert

Be Sociable, Share!

5 Responses to “Analyzing the Future Bet”

  1. What would you say is a reasonable amount of your bank roll to put on a signal future and also what is a max amount of bankroll you should use on all your future bets. I use 1% of my bankroll as my 1 unit bet, with my max bet being around 5 units and my average bet being around 1.5 units. I want to make some future bets like to win BCS, Conference and team wins O/U. I would think no more than 1-2% per future and not more than 10% of bank roll on future bets. What would you suggest?

    • SabertStxVii SabertStxVii says:

      So money,

      I think this is more of a feel situation. I think there is a certain situation where you need to put enough money on the future to be able to hedge yourself. For example, Georgia is 17/1 right now. Let’s say that I take that for $100. At the end of the season, you won’t have better odds than that lets assume. The other team that makes the National Championship is USC. By the end of the season, USC is 2/1 to win (basically knowing that they are going to make the game). At 2/1, you have to lay much more to evenly hedge your bet.

      With that being said, I think it depends on your bankroll and how comfortable you feel. I typically make future bets for fun and don’t have tons of conviction on them (I’ve mentioned that I’d much rather save the $$ for ATS during the season). I agree with your ratings though of amount to put on the future bet. I think it makes sense.

  2. ERockMoney says:

    Sabert,

    Thank you for the insight on future betting.

    I would disagree with your closing comments regarding varying wager amounts. In fact, I would suggest the strategy your recommending is one of the main reasons for mismanagement within ones precious bankroll. There simply is not enough of an edge to implement a wagering strategy that includes too much variance or possibly any variance at all.

    One of the most common mistakes a gambler makes is fooling themselves into believing they have more of an edge than they actually do. Thus leading them down a slippery path where they tying too large a percentage of their bankroll into a certain segment of selections. Less expected value and poor money management will burn through the bankroll faster than anything.

    On the other hand, maybe the player has a solid handle on their edge/value and is correctly making wagers on this action, yet is foolishly playing the “lesser” games where there is no value/edge and slowly giving back profit and lessening their return. It’s six of one and half a dozen of the other.

    I personally have been flat betting 2% per play for a few years. I wasn’t always this way, but have adapted over the years. As they say, there are many ways to skin a cat, but show me too much variance in your wager sizes and I’ll show you frivolous losses or leakage of profit.

    I know many strong players who use a 1-3 unit variance or 1-3% of their bankroll on plays. In nearly every instance it’s either:

    A) the player is strong enough and carries the same edge, so they should be playing 3% on all wagers; demonstrating leakage by watering down certain selections
    B) the player is playing too many plays and has recognized their ability with their “top” plays, but is watering down their returns by playing 1-2 unit plays where there is no value; adding frivolous losses by creating a false edge

    It’s just very difficult for me to understand why anyone would think they have a three times as likely chance to win on game A versus game B, yet be playing both games. If the edge and variance is accurate, they should not be playing game B and if the edge and variance does not exist at the expected level they should be playing both games for the same amount or playing neither.

    I’m not even going to get into the five and ten time variance because it’s completely absurd. I still play games I’m deeper into a “testing phase” at a smaller clip (1%) until I’m completely certain the value is there and attempting to determine if the play should be eliminated or moved into a regular 2% play in a future setting.

    The bottom line is, if someone is playing $100, $200 and $300 games and has an actual, proven, credible edge on all three, they are leaking profits by varying their bet sizes and they would create the most efficiency by playing all games for their max bet of $300. If they are winning on the $300 and $200 over statistical significant time frame, but losing on $100 they should be playing the $200-$300 at the max bet of $300 and eliminating the $100 games from their weekly card.

    Unfortunately, most players don’t know if they are a winning player and/or convince themselves they are without the necessary back up to actually determine its validity. A player can create a false expectation after having a solid season of 100 plays, which holds virtually no statistical credibility. Even at 500 plays, your building some foundation, but still plenty of uncertainty. Get to a thousand play data set and you should start to be able gauge what edge, if any, you actually have. To make matters worse, if you change strategies during the data set, you have corrupted the set for your prospective projections.

    IMO, the strategy of the 1-3, 1-5 and 1-10 unit wager system is one of the biggest and most common mistakes a player makes regarding their bankroll. Identifying a “top play” typically only means your other plays lack value and should be discarded or they likely still provide a return and should be played at the same amount as your top play. If ones top plays hit a 56% and their secondary plays hit at 53% over a large sample, both are demonstrated winners and should be played at the same rate as the 56% plays or your leaking profit. Leakage can be as dangerous as and far less noticeable to the player than an actual losing wager, yet both have the same effect on you bankroll preventing the player from maximizing their returns.

    BOL this season.

  3. Pezgordo Pezgordo says:

    ERockMoney,

    Outstanding info as usual. From a personal perspective I agree with your flat bet theory and that is how I typically wager. I wager 1.5% of my bankroll on each game. I do sometimes end up wagering more (never more than 2%), but it is based more on additional information or line movement.

    For example, several years ago I liked Maryland +13 against Clemson and I made the wager mid-week. A few days later Dr Bob releases Clemson as one of his picks. The line shoots up to something like 19. After “re-capping” the game I still liked Maryland so I added to the wager.

    “One of the most common mistakes a gambler makes is fooling themselves into believing they have more of an edge than they actually do. ” This is a great statement. I believe that no one knows exactly what their edge is (if any) and therefore any perceived edge should be wagered using a flat rate amount.

    I have read a lot about the counter argument (Kelly criterion), but I it still comes down to the point you make in your comment, how do you know your exact edge? Therefore how can you wager 2.6% on one game and 3.7% on another.

    The Kelly argument would be if you don’t know your edge then you shouldn’t be wagering, however, I have yet to meet anyone who can tell me their exact (or semi-calculated) edge for each game.

    If as you say someone has accumulated a large enough sample size to establish confidently that they have en edge, then they should be wagering the same amount on each game IMO.

  4. SabertStxVii SabertStxVii says:

    ERock and Pez,

    Thanks for your very detailed comment. Comments and provoking insight like this are what makes sites like this valuable.

    I think this is very situational and depends on how you come to your plays. I for one have a few different methods in determining an ATS play. On Monday I print out the schedule for the week. I circle any game that I think from just looking at it, there is value (usually 10-12 games).

    I then use a statistical model I have to analyze stats of one team compared to another, to predict a final score. Then I use what in Finance is called a Monte Carlo simulation. This allows me to set the minimum and maximum ranges on stats and then come to a final score. An example of this is if Aaron Murray is nursing a rib injury and the O-line is banged up after a tough week. I would set the passing yards to a lower amount thinking that he won’t have as good of an outing. So this gives me a score output.

    I then have the ability to adjust the score a certain percentage based on factors such as: Homefield, Coaching, Motivation, Penalties, etc.

    I feel as though I do have a strong conviction to play different amounts. I don’t even pick the unit size, the model picks it for me. It all comes down to the amount of factors (which I deem important) lining up.

    Another reason why I feel as though I have conviction to play different amounts is because the confidence I feel with each team. When I’m capping the Tuesday night Ohio vs. Western Michigan MAC game (or any other MAC game for that matter) compared to a team that I follow in a spot that I like, I’m obviously going to put more money onto the second scenario. That isn’t saying I don’t see value on the MAC game, but I’d rather expend my bankroll on a team that I feel like my capping abilities are more reflective of the actual scenario.

    I’ve had plenty of seasons where my average unit size has hit under 50% but I’ve ended up very positive due to my stronger conviction players hitting around 75/80%. I know the argument here is I need to pick my spots better, but I do still see value in certain plays, so I play them.

    I guess the difference may be that I can see differences in my plays, but still see value in both. There was a reason why last years National Championship was only a 2.5 unit play but South Carolina vs. Nebraska was a 4.5 unit play. Even though I was pretty spot on with my write-ups and sides on both, more things aligned for SC than did the BCS title game. To read each play, see below.

    In the end, I think there is no exact science and to each his own. If you are crushing it using flat bets, game on. If you have a good system using unit plays, good for you. I’ve seen very successful bettors use both methods.

    National Championship
    http://www.therxforum.com/showthread.php?t=886847

    SC vs. Nebraska
    http://www.therxforum.com/showthread.php?t=882587&page=1

Trackbacks/Pingbacks

  1. SabertStxVii Week 1 College Football Picks - [...] unit bet on plays. We have had good discussion on one of my previous articles which can be found …

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>